|
Deposit - Where Default Other's Fault. Pleterski (Re) [where relief claimant precipitates breach]
In Pleterski (Re) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a motion that granted a bankruptcy receiver 'relief from forfeiture' from a defaulted APS deposit.
Here the court considers the awarding of relief from forfeiture even where the bankrupcy receiver precipitated the breach of the APS contract:[5] A few weeks before the closing date, Grant Thornton and Mr. Murphy advised the appellant that they would not be completing the transaction. The appellant treated this as an anticipatory breach, and a few months later it sold the Westney Road property to another purchaser for $300,000 more than Mr. Pleterski and Mr. Murphy had agreed to pay for it. However, the appellant maintains that before it resold the property it had to spend money repairing damage done by Mr. Pleterski and Mr. Murphy.
[6] Grant Thornton moved for relief from forfeiture of the $500,000 deposit, pursuant to s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”). The motion judge granted this relief and ordered that the $500,000 deposit being held in trust by the realtor be returned to Grant Thornton, for the benefit of the creditors in the bankruptcy.
[7] Applying the two-part test approved of in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374, at para. 15, the motion judge considered the following two factors:(1) whether the forfeited deposit was out of all proportion to the damages suffered; and
(2) whether it would be unconscionable for the seller to retain the deposit. He concluded that in the circumstances here, both factors weighed in favour of directing that the full amount of the deposit be returned to Grant Thornton.
....
[9] The appellant appeals. It acknowledges that decisions under s. 98 of the CJA are discretionary and ordinarily command appellate deference: see Redstone, at para. 14. The appellant framed its arguments somewhat differently in its factum, but in oral argument counsel distilled her submissions into an argument that the motion judge made two related errors.
....
[14] The appellant’s second argument is that the motion judge erred by describing this case as a “dispute ... between two innocent parties.” According to the appellant, if the motion judge had focused his attention on Grant Thornton rather than on Mr. Pleterski’s investors, he would not have characterized Grant Thornton as “innocent”, since Grant Thornton had deliberately caused the breach of contract by choosing not to complete the transaction.
[15] The appellant places particular reliance on Frechette (Re) (1991), 1991 CanLII 7207 (ON SC), 3 O.R. (3d) 664 (Gen. Div.), which at p. 673 quoted approvingly Cotton L.J.’s observation in Howe v. Smith (1884), 27 Ch. D. 89 (C.A.), at p. 96, that a purchaser who has “acted as to repudiate on his part the contract” cannot “take advantage of his own default to recover [a] deposit from the vendor.”
[16] However, this court has rejected the argument that there is an absolute rule that bars a party who has caused a breach of contract from ever obtaining relief from forfeiture of a deposit. In Naeem v. Bowmanville Lakebreeze West Village Ltd., 2024 ONCA 383, 51 B.L.R. (6th) 199, at para. 7, this court held:Significantly, Redstone does not make it a precondition for obtaining relief from forfeiture that the party seeking relief demonstrate that they were not to blame for the contractual breach. Although the would-be buyer’s conduct will often be highly relevant to the question of whether it would be unconscionable to permit the vendor to keep the deposit, it is only one factor to be considered. [17] In Ching v. Pier 27 Toronto Inc., 2021 ONCA 551, 460 D.L.R. (4th) 678, at para. 78, Pepall J.A. explained that:[R]elief from forfeiture is an equitable and discretionary remedy. Absent a legal or palpable and overriding error, it is not for this court to substitute its discretion for that of the trial judge. [18] In the case at bar, the motion judge correctly instructed himself about the applicable legal principles. He recognized that “[a] finding of unconscionability must be an exceptional one, strongly compelled on the facts of the case”, adding:It is indeed the rare case when the law that typically applies to deposits ought not to be applied. That is precisely why, in my view, the equitable remedy of relief from forfeiture exists in the first place, and it is also why such equitable relief is granted only sparingly and in rare cases.
|
